Easy to feel excluded if you have a history

By Peter Pallot

12:00AM BST 31 May 2007

Expatriates with a medical history, such as high blood pressure or knee trouble, often get a cold shoulder from insurance companies. Insurers are happy to sell them a policy but exclusions inevitably mean the policyholder is left exposed in the very areas where the individual is most likely to need cover.

These situations may arise after "full medical underwriting" - medical checks and reading of medical records. Exclusions are then spelt out to the prospective buyer. Or the premium is loaded to cover the additional risk. A decision then arises as to whether to accept the conditions or try elsewhere.

Another route is the moratorium. This is a period (often up to five years) in which prospective policyholders must be able to prove they have not received treatment of an old medical condition before buying the plan, and a further period (often two years) without treatment after buying it. They are then fully covered. Insurers make things watertight from their perspective by adding that, as well as having no treatment, the individual must display no symptoms, and seek neither advice nor consultation on the condition during the moratorium.

Moratoriums have come under fire because policyholders can be misled over when they are in cover and when not. If the policyholder "fails" the two-year post-purchase period, they can reset the clock for a further try later. This offers hope, but can also promote confusion as to when precisely cover holds good.

Individuals may also inadvertently blow cover by seeking a consultation on an apparently unrelated matter which arguably impinges on the excluded condition.

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Consumer watchdogs have dubbed moratoriums a charter for unscrupulous insurance brokers. The counter argument is that the system offers hope of full cover to people who would be forever excluded by medical underwriting.

A new plan for expatriates introduced by Gibraltar-based insurer Lamp offers a simpler form of moratorium. It was pioneered for the UK domestic market by PruHealth, the medical wing of the Prudential. The Lamp version is a two-year "flat" moratorium: after two years pre-existing conditions are covered irrespective of any treatment received.

The simplicity will go a long way to defusing criticism of moratoriums, insurance advisers say. George Connelly, of Health Care Matters, an independent adviser based near Dorchester, in Dorset, said: "In effect, it's a two-year wait to get cover. The advantage is clarity. To explain to clients that with a normal moratorium, after taking a policy at some point you have to go two consecutive years without any treatment, consultation, advice or symptoms for that particular condition is a bit of mouthful. The symptoms bit means that if someone has high blood pressure they will never get taken on because they will always be on medication."

He added: "The Pru, to give them their due, say that if your blood pressure is normal under medication there is no restriction." But that approach was rare, he said.

Lamp Insurance was set up only two years ago and advisers point out that newcomers often price very competitively to win market share and then steeply increase premiums. However, the Lamp International Healthcare plan wins an 8 in 10 rating in Health Insurance, a publication for insurance brokers.

The flat moratorium gains approval and also singled out are the "generous" benefits for chronic conditions. Diabetes, asthma, arthritis and similar persistent ailments are increasingly being targeted by insurers, especially in new plans.

On price, a 35-year-old with Europe-wide cover and no excess pays £466 a year for the Core plan, which concentrates on in-patient with £300 out-patient cover. Core Extra, offering improved benefits, comes in at £777 for the same individual. Comprehensive cover includes unlimited out-patient bills and costs £1155 for a 35-year-old in Europe. A spokesman for the company said that, despite the Gibraltar connection, sales efforts were being concentrated worldwide rather than just Iberia, with China a particular target market.

Lamp Insurance Services, which administers the plan, is regulated by Britain's Financial Services Authority. The website www.lampinsurance.com does not give much detail of the scheme but lists numbers for Gibraltar (Int 44 350 51904) and the UK (Int 44 1444 444957).